NEW YORK (CNNMoney.com) -- Private-sector employers continued to cut jobs in March, highlighting the challenges still facing the nation's job market, according to a report released Wednesday.
Automatic Data Processing, which processes paychecks for one in every six U.S. employees, said private-sector employers cut payrolls by 23,000 jobs in March, marking the smallest monthly decline since February 2008.
The decline surprised many economists. A consensus of economists surveyed by Briefing.com had forecast a gain of 40,000 jobs in the month.
The number of job cuts in February was revised to a loss of 24,000 jobs from the previously reported 20,000.
"American businesses are on the cusp of recovery, yet this report shows that they remain hesitant to increase their payrolls," Gary Butler, chief executive of ADP, said in a statement.
The service sector reported an increase of 28,000 jobs in March, marking the second consecutive monthly increase and the highest job growth since March of 2008.
However, that growth was offset by a loss of 51,000 jobs in the goods-producing sector and a drop of 9,000 manufacturing jobs.
Large businesses, those with 500 or more workers, saw employment decline by 7,000 jobs, while small-size businesses with fewer than 50 workers had a drop of 12,000 workers.
Employment among medium-size businesses, defined as those with between 50 and 499 workers, declined by 4,000.
Many economists view the ADP report as a proxy for the government's monthly jobs report, which comes out Friday.
That report is expected to show a gain of 190,000 jobs in March, compared to a loss of 36,000 jobs in February. The unemployment rate is expected to remain unchanged at 9.7%. Some economists may revise their estimates in light of Wednesday's report.
However, the ADP report was not impacted in February by the effects of severe winter weather, while the government report was, according to Joel Prakken, chairman of Macroeconomic Advisers.
That means Wednesday's report does not incorporate a weather-related rebound that could show up in Friday's Bureau of Labor Statistics report, Prakken said.
At the same time, the ADP report does not include any federal hiring in March for the 2010 Census, which some economists believe could add over 1 million temporary jobs to the economy.
John Schnatter is Papa John. He's tied to Papa John's advertising as cheese is to pizza, but he resigned as chairman for using a racial slur. More
There are more signs that China's economy is slowing as its trade fight with the United States escalates. More
Companies like Careem, Grab and GoJek are making aggressive moves into areas well beyond transportation. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
Free food and ping pong tables are fun office perks, but do they actually help with employee retention? More